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The mortgage market could feel pressure from the rise of oil prices.

 

The financial markets have been closely watching the rapid rise in oil prices as this is certain to impact corporate earnings, there is also the potential to impact mortgage rates.

The price of a barrel of oil has nearly doubled in the past twelve months. This increase is putting an enormous strain on an economy that is already suffering from one of the worst real estate downfalls in history. The challenge that the market faces with oil prices skyrocketing is that the economy is going to see a larger inflation period. The number of companies that are going to pass along the costs to consumers is increasing by the day and the stress this will have on corporate earnings is already being discussed. This puts the market in a paradox position. Inflation tends to force mortgage rates to move up. Investors however will have to weigh the potential impact of the oil challenge on corporate earnings and may prefer to stay with safer bond investments which could help neutralize the inflation threat. The true bottom line is that whether or not rates move up or down, is almost secondary to the concern that this increase of oil prices and gas prices is going to neutralize the recent economic stimulus package passed by the government aimed at helping to restore the economy and bring some new candidiates into the home buying markets. The market would love to see a correction, but this appears to be unlikeley considering that we are entering the summer months and peak driving season.

5-9-2008 ? LoanNetwork.com

 

 

 

 

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